Poland accomplishes record cut in VAT gap

Photo: PAP/Paweł Supernak

Poland’s policies on closing the VAT gap could be adopted by Germany and other countries because they have been so successful, the deputy finance minister has claimed.

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Jan Sarnowski said Poland now has the potential to close the VAT gap, which is the overall difference between the expected VAT revenue and the amount actually collected, to around 5 percent, owing to the use of new technology and closer cooperation with other countries.

"Poland has achieved a record decline in its VAT gap," Mr Sarnowski told a private television broadcaster. The German Bundesrechnungshof (BRH), a counterpart of the Polish Supreme Audit Office (NIK), wants the German government to implement measures which have proven to be successful in Poland.

"As far as tax collection is concerned, over the last four years we have managed to close a huge gap in relation to other European countries," Sarnowski stated, explaining that, in 2015, the VAT gap stood at 24 percent of potential tax revenues, and in 2018 and 2019, it dropped to around 12 percent.

Mr Sarnowski went on to say that, according to the European Commission, the decline in the VAT gap in Poland was even quicker, since it shrank from 24.7 percent in 2015 to 9.7 percent in 2019.

"Now the VAT gap in Poland is lower than the EU average which, according to the European Commission's estimate, stood at 10.9 percent in 2019."

Mr Sarnowski said that despite the Covid-19 pandemic Poland has been consistently eliminating loopholes exploited by criminals, and has been planning further measures, including the introduction of an e-invoice.

The minister attributed the government’s apparent success in closing the gap to its ability to say “no”.

"We said 'no' to tax crime,” he said. “The decline in our VAT gap is the effect of a multi-element plan, which has made it more difficult for tax offenders to operate."

He added that “money laundering” was now very difficult.

According to Mr Sarnowski, the increase in VAT revenue now reached several tens of billions of PLN. The money, he said, has not gone into the bank accounts of tax offenders, but instead has been used to offer assistance to Polish families and businesspeople.

New technology also plays a part

"Owing to new technology, the Finance Ministry has been able to analyse 100 million invoices a month," he said, adding that Polish IT specialists have created a unique European programme used by banks to follow cash flows with regard to money laundering.

Mr Sarnowski also said that Poland's successful fight to cut its VAT gap "has been carefully followed by other countries of our region."

"Poland has already signed agreements on know-how and information transfer with other Visegrad Group countries, Estonia and Ukraine," he stated.

"These are not empty declarations,” he said. “These are countries, which want to implement measures that have proven to be successful in Poland," the official said, adding that cooperation with Poland would give these countries more funds in their budgets. "And for us, this means better conditions for Polish companies, which will not have to compete against tax offenders," Mr Sarnowski concluded.